They Know a Bargain When They Make It
This title comes from a comment on Ted Butler’s undisputed claim of JP Morgan’s accumulation of upwards of 500 million ounces of physical silver (or nearly 11,000 tons) over the last four to five years.
This accumulation occurred during a time of horrible sentiment and subdued retail demand. “They Know a Bargain When They Make It” puts the whole issue of manipulation into perspective. It’s almost perfect, capturing, in essence, what the great conspiracy all comes down to in the end. They are making themselves a bargain, because they can.
The issue of gold and silver price manipulation has been circulated and documented among the backwater of blogs and alternative (world-local) publications for decades, led by Ted Butler and the Gold Anti-Trust Action Committee.
For now, the COMEX is the center of price discovery. The most volume. The most inventory. The most well developed. One of the largest known stockpiles.
Paper futures are derivatives of physical metal held within a complex system of warehouses moving incredible amounts of inventory and huge percentages of annual production each day and week. Silver movement far outstrips every other commodity.
For paper, there is a long for every short. It’s a zero sum game. There are 100’s of traders holding contracts. As of June 12th, there were over 179,471 open contracts. The holders on either side, short or long, are 99% speculative. In other words, they exist for price direction and momentum, and nothing else.
Of the two main categories of traders – commercials (banks) and managed money funds (hedge funds) – the 4 largest commercial traders hold a massively concentrated short position relative to any other commodity.
The general belief is that these postions are largely held for clients as ‘hedges’ — or an insurance for another bet some place else. Some are swaps between months.
But even if it were true, it doesn’t matter, because concentration, first and foremost is the tail that wags the dog. The monthly Bank Participation Report reveals JP Morgan Chase as the consistent big short – having taken over the position from Bear Stearns in 2008.
Again, the largest of the commercial category make up a huge percentage of the short side. The longs represent a much more diversity. These are paper, electronic managed and seemingly impersonal positions.
Actual silver supply is tiny by practically any measure, from actual available supply to its largely horribly misunderstood investment and industrial demand character.
Since May of 2011, JP Morgan has led the way, rigging the price lower of one of the (already) most undervalued assets in existence and profited.
And then they bought it all back.
They purchased silver in coin form from Mints all over the world and took delivery of futures contracts (bar form) on their own behalf.
It’s under the radar, because even when presented with the evidence, most people refuse to believe it. They’ve long bought and continue to ‘pay’ their way out of prosecution and lawsuits. They’ve been given literal and implicit government guarantees. They took over Bear Stern’s big concentrated short because it was part of the rescue bargain.
So why not make the big grab? They almost have to. Would it be a stretch to hear the conversation go down like this?
“Look, see – we have all the physical we need – right here. Don’t worry. That short position isn’t a problem at all. It’s backed.”
“What? What do you mean we rigged the price lower? The price went down like all other commodities.
“Besides, prove it. The CFTC already said nothing was the matter. They threw out that class action lawsuit a few years ago. That’s the age-old conspiracy. Come on, those positions are hedged. And you know what? Without us, everything would come unglued. So stop complaining.
“We are keeping the wheels of industry turning by providing the means for capitalism. We facilitate the liquidity. We are like plumbers. You like running water and indoor bathrooms, don’t you?
“Without us, you wouldn’t have your electronic food stamps. Can you imagine what it would look like if all these people couldn’t eat? This system of capital goods and services – the shuffling needs order and efficiency – that’s what we do. Without us, it will all fall apart.
“Why are we the best? Because we always been committed to the highest principles and standards. We advise governments and the most important institutions in the world. We are a partner in every industry. We are pervasive.
“We see opportunities and we seek them on behalf of our responsibility to shareholders, investors, and clients. And we make big money for them. In fact it’s our legal obligation to do so.”
Ask a trader, an investor, and politician about silver price manipulation and what little interest or curiosity you may find will be shrouded in primitive social memes surrounding wealth and money. The Hoarder. The doomsday seeker. The MadMax worshipper. The conspiracy theorist.
The irony is that all these memes are echoes from the literal forest fire of demand lurking beneath the canopy.
The presence of paper futures long and/or short side concentration makes it the primary price driver by nature. It doesn’t even matter if the positions are naked. If you have the market cornered, you control the price direction.
You can lower while buying up all that remains of the visible stockpile.
They make it by using a dominant position in both technical and actual positions. The concentrated short position (massive relative to every other commodity) is almost unnecessary at this point. The technology provides the ultimate capability to wag the tail — control price movement and direction.
Watch what they do, not what they say. And while they are inextricably tied to the monetary authorities, by legal or surreptitious capacity, they are first are foremost out for themselves – their true nature.